Thursday, 16 October 2014

S&P 500 below 1800 would be an important boost for the bearish case

As you might know, I believe that the S&P 500 rally from 2009's low is likely complete, with the market now embarking on a 60%+ decline toward 600 points.

The monthly chart suggests that the market's position relative to the 18 period moving average is a good indicator of market direction in subsequent months and often years.  Obviously then, my confidence in the bearish case would be boosted if the market could move below the illustrated moving average and stay there, perhaps after some back and forth wrestle for a time. That moving average is currently around 1800, and S&P futures are trading around 1830. Let's see.

Traders must believe in uncertainty

My interest in markets is both as a trader and as a blogger. It can be challenging to stop the emotions from one activity spilling over to the other.

A trader cannot be certain about the future in the way a blogger can appear to be. In fact a trader must believe in uncertainty, that markets can do anything, otherwise they don't genuinely understand risk, and probably haven't designed their trading system to adequately manage risk.

Traders must respond to what the market is doing, rather than what they believe the market should do.

As a blogger I proclaim my market views, loudly and often. The blogger facet of me is the outlet for my inner Nostradamus.

Better that fortune telling finds an outlet in my blogging than in my trading.